Three Types Of SBA Loans

The different types of small business administration loans (aka SBA loans) are designed to meet the diverse needs of various small business models as well as their requirement for funding. Three of the most popular types of SBA loans that are ideal for most types of businesses and their requirements include:

1. 7(a) Loan

The 7(a) SBA loan is the most popular and common choice for business owners as it meets with most requirements. The loan makes provisions for finance in the form of capital, asset finance (such as the purchase of equipment, tools, car, etc.) or the purchase of a property, business premises or real estate. It can also be used to purchase an existing business or to cover the start-up costs of a new business. A loan can be approved for up to $5 million.

2. CAPlines

The CAPline SBA products provide a line of credit on a short term basis to meet the varying seasonal or immediate financial needs of a business. It offers 3 different basic lines of credit and 2 asset based credit products:

– Seasonal lines of credit are a short term financing option to meet immediate operational requirements and normally need to be repaid within a few months and are available up to $5 million.
– Contract credit provides funding to cover costs and expenses related a specific contract and the full amount becomes due upon the completion of the contract. This is a short term finance option of up to $5 million.
– Builder's line of credit is used to purchase building materials, cover the cost of labor and other needs related to a specific building project. The credit is provided until the completion of the project and can be up to $5 million.
– Asset based lines of credit are provided where a business asset (like equipment or outstanding invoices) can be offered as security or collateral on the loan amount. SBA offers a small asset based line of credit lower than $200,000 and standard asset based credit in amounts not exceeding $5 million.

These lines of credit are ideal for seeing to the short term financial requirements of a business.

3. Microloan Program

The SBA Microloan Program is aimed at providing small loans to small businesses of up to $50,000. The repayment terms can be up to 6 years. However, like most types of small loans, microloans have a higher interest rate and it is important to evaluate the financing needs of the business related to the cost of the loan in order to determine the suitability of the loan. It may be more viable for a business to take a different type of financing option in a larger amount for a shorter period or opt for a line of credit.

All the different types of SBA loans are aimed at small business enterprises that may have trouble getting loans from regular business loan providers, banks or other types of financial institutions. Businesses must meet the requirements for a small business in order for an SBA loan to be approved.